ABSTRACT
There is a growing theoretical literature on credit and savings in economies characterized by incomplete markets and imperfect information (e.g. Alderman and Paxson 1994). These works help us analyse the institutional arrangements through which financial transactions take place in sub-Saharan Africa. Aside from playing the core role of intertemporal allocation of resources, credit transactions reflect the economic environment within which they occur. As this study has shown, the environment in sub-Saharan Africa is usually characterized by objective risk, with unpredictable variations in income as a result of weather and other exogenous processes. In the absence of complete insurance markets, credit transactions take on a special role in allowing resources to be transferred in response to income shocks. The costly acquisition and asymmetrical distribution of information are essential aspects of this environment. Risk and information take on a special role in credit transactions, an analysis of which provides an important insight into intertemporal transfers of resources.
